Russia is called a “colossus with feet of clay,” i.e., an asymmetrically weak country that relies on resource potential, which makes raw materials a vital piece of its economy. However, thanks to Putin, after February 24, 2022, it is more appropriate to compare the Russian economy with the Titanic, steadily moving towards its destruction.
Food shortages in an agricultural country, a record rise in gasoline prices, hundreds of thousands of freezing Russians burning fires in a gas-producing country, and finally the collapse of the military and civil aviation in the country that once had leading technologies… there is an incomplete list of problems that were unthinkable in Russia before the start of the war. Accordingly, from the very beginning of the full-scale invasion of Ukraine, Russian propaganda efforts were concentrated on creating myths for the population: about the invincibility of the Russian army, about the absence of casualties in its ranks, and finally, about the resilience and indestructibility of the Russian economy. Myth-making is perhaps the main activity of leading propagandists. Their work is generously paid by Putin so that they convince the population of the Russian Federation that there are no problems, and the so-called SMO is “going according to plan.” Dry statistics indicate the opposite: Western sanctions are slowly but steadily affecting the Russian economy and the military-industrial complex, although the Russian Federation continues to import dual-use goods for the production of missiles and drones in roundabout ways.
Professor at the Yale School of Economics Jeffrey Sonnefeld reveals the real state of the Russian economy after Western sanctions, which provoked an outflow of business: along with foreign capital, the latest technologies partially left Russia. The Russian oil and gas sector has also suffered from the loss of access to modern technologies for oil production and refining. In particular, Rosneft was forced to spend an additional 10 billion US dollars on investments, which added 10 US dollars to the cost of each barrel of oil. In total, after the start of the war, the outflow of private capital from Russia amounted to 253 billion US dollars.
First of all, Western sanctions hit Russian exports to Europe. According to preliminary estimates by the RF Central Bank, Russian exports in 2023 amounted to 422.7 billion US dollars, which is 169.4 billion US dollars (almost 30 %) less than a year earlier. The reason is the aforementioned raw material resources: after the Russian invasion of Ukraine, the Russian economy did not collapse due to high oil prices, but now “black gold” is rapidly becoming cheaper. In 2022, a barrel of the main Russian oil brand, Urals, cost 76.1 US dollars, and already in 2023 – 63 US dollars. The situation with gas is the same: Russia lost its main export market — the EU, which is why about 40 % of Russian gas exports were lost. According to Rosstat, in 2022-2023, the main raw material exports from the Russian Federation decreased by 35 %. The reduction in exports of Russian raw materials, primarily energy resources, provoked inflation and, as a result, an increase in prices for everything: from food to gasoline. Inflation in the Russian Federation in 2023 was 7.42 %. This is official Rosstat statistics. However, gasoline prices in 2023 increased by 7.23 % (at the beginning of 2024 they began to purchase it in installments), egg prices for the same year increased by 61.35 %. Real inflation in the Russian Federation has long exceeded 10 %. But the head of the Central Bank of Russia, Elvira Nabiullina, is artificially maintaining the ruble exchange rate until April 2024 — the Kremlin does not want to spoil Putin’s election campaign, after which Russians will face a sharp increase in prices and decline in living standards.
Despite the fact that Russia faced an unprecedented package of sanctions, which had a negative impact on its economy, as confirmed by the above figures, there is no complete collapse of the Russian military-industrial complex. Indeed, many military programs had to be significantly reduced or closed, but Moscow confidently circumvents the imposed restrictions by importing high-tech components through China and other countries.
There are no weapons in Russia that do not use Western technologies, so stopping the transit of such goods can destroy the military-technical potential of the Russian Armed Forces.
In the period from March to December 2022, the Russian Federation imported 72 % of such components from Chins — this is 22 % higher than the previous year. The paradox of the situation is that over 60 % of dual-use goods are produced in the USA — and, bypassing the sanctions imposed by the West, they still end up in the Russian Federation. American components were found in the Kh-59, Kh-101, Kalibr and Iskander-K downed missiles, as well as in Orlan-10, Shahed-131, Shahed-136 drones. American companies such as Analog Devices, Texas Instruments, Microchip Technology, Intel Corporation and Advanced Micro Devices (AMD) have provided at least 52 % of the high-tech imports used in Russian missiles and UAVs. Despite sanctions, Russia has access to such technologies, importing them by “transit” through allied countries. If, for instance, Armenia increases imports of electronics by 560 % within six months, it is difficult to believe that this is for its own needs. According to the head of the Ukrainian Security and Cooperation Center, Serhiy Kuzan, in 2022, the Russian military-industrial complex produced 512 missiles (estimated). However, in 2023 this figure was 1,060 units. The Russian military-industrial complex has been especially successful in the production of Kh-101/Kh-555 missiles — at least 100 units per month. These missiles were massively used in the greatest shelling of Ukrainian cities on December, 19, 2023 and January,2, 2024. The “positive effect” of sanctions is obvious.
Consequently, this statistic contests the claim that Western sanctions have destroyed the Russian military-industrial complex, depriving it of advanced technologies. The creation of a mechanism for suppressing “gray imports” in the Russian Federation and the introduction of secondary sanctions against violators is one of the most important tasks for weakening the Russian military-industrial complex. Ignoring this problem only emboldens Putin, who is preparing for a permanent confrontation. There are no weapons in Russia that do not use Western technologies, therefore, stopping the transit of such goods can destroy the military-technical potential of the RF Armed Forces.
* The author’s opinion may not coincide with the editor’s opinion